UPM-Kymmene. Interim Review

Transcription

1 UPM-Kymmene Interim Review 1 6/2002

2 UPM-Kymmene Interim Review 1 January 30 June 2002 Second-quarter earnings per share, excluding capital gains/losses, were 0.49 (0.60 for the first quarter). Operating profit, excluding capital gains/losses, was 265 million, 9.9% of turnover (first quarter: 284 million, 11.1%). Profit before extraordinary items and capital gains/losses was 193 million (first quarter: 217 million). Cash flow from operations per share was 1.57 (first quarter: 1.1. Turnover was 2,679 million (first quarter: 2,566 million). Earnings Second quarter of 2002 compared with first quarter Turnover for the second quarter of the year was 2,679 million, compared with 2,566 million for the first quarter. Operating profit was 271 million (274 million). Operating profit includes 6 million in net capital gains from asset sales (net capital losses of 10 million). Excluding capital gains/losses, operating profit was down 7% at 265 million (284 million). The decline in profitability was due to exchange rate losses of 28 million on trade receivables (gains of 3 million) and somewhat lower sales prices. On the other hand, the financial result benefitted from a slight seasonal increase in deliveries. Excluding capital gains/losses, operating profit was 9.9% of turnover (11.. Profit before extraordinary items and capital gains/losses was 193 million (217 million), and 199 million including capital gains/ losses (207 million). Net financial expenses were 72 million (67 million), including dividend income of 2 million (17 million). Excluding capital gains/losses, earnings per share were 0.49 (0.60), return on equity was 7.7% (9.2) and return on capital employed 8.4% (9.3). First half of 2002 compared with the same period last year Turnover for January June was 5,245 million, 4% higher than the same period last year. The increase is due to acquisitions. Excluding capital gains/losses, operating profit was 549 million, 27% down on the previous year s corresponding figure of 753 million. The main reasons for the decrease were reduced demand and lower prices for newsprint and magazine papers. Operating profit was 10.5% of turnover (15.0). Net financial expenses were 139 million (126 million), the increase being due to lower dividend income. Despite increased indebtedness, net interest expenses were little changed on last year. Income taxes were 127 million (156 million). Excluding capital gains/losses, earnings per share were 1.09 (1.9, return on equity was 8.4% (16.0) and return on capital employed 8.8% (15.0). Production and deliveries Paper production for the first six months was 4,885,000 tonnes, 17% up on the previous year s figure of 4,166,000 tonnes. Paper deliveries totalled 4,760,000 tonnes (4,050,000 tonnes). The average capacity utilization rate was 86% (90). 2 UPM-Kymmene Interim Review 1 6/2002

3 Financing At the end of the period the Group s equity to assets ratio was 42.6% (44.3% at 30 June 200 and the gearing ratio 89% (82). Net interest-bearing liabilities were 5,972 million (4,806 million at 30 June 200. The increase is due primarily to the purchase of Haindl last November. The average rate of interest on the Group s loans was 3.8% (5.5% for the first half of 200. The cash flow from operations, before capital expenditure and financing, was 693 million (589 million). Personnel During the first half of the year, the UPM-Kymmene Group had an average of 37,084 employees (34,087 for the same period last year). The number at the end of June was 39,167 (36,563). The increase is due to company acquisitions. Capital expenditure and restructuring Gross capital expenditure, excluding acquisitions, for the first half of the year was 264 million (433 million). Acquisitions and share purchases were 20 million (162 million). In May, it was decided to modernize the Pietarsaari pulp mill at an estimated cost of 250 million. The project will be carried out in conjunction with Pohjolan Voima s subsidiary Wisapower, whose share of the cost will be roughly 50%. Work on the mill is scheduled to be completed in spring 2004, when production capacity will rise from 620,000 to 800,000 t/a. Also in May, it was decided to build a 200,000 m 3 /a sawmill at Novgorod in Russia. The project is expected to cost around 30 million and should be completed during After the end of the review period, UPM-Kymmene announced it had received approval from the relevant authorities to expand its paper mill in China. A study has been started relating to construction of a new 450,000 t/a fine paper machine at Changshu near Shanghai. Integration of Haindl Integration of Haindl, which was acquired last November, has gone according to plan. The acquisition has contributed to the cash flow and earnings per share as expected. Shares UPM-Kymmene shares worth 5,795 million were traded on the Helsinki Exchanges during the first half of the year (3,527 million). The highest quotation was (in March) and the lowest (in January). On the New York Stock Exchange, the company s shares were traded to a total value of USD 68 million (49 million). During the review period a total of 1,279,044 shares were subscribed under the FIM 960 million convertible bond issue of The number of shares in issue at the end of June was 259,996,869. The Annual General Meeting held on 19 March 2002 approved a proposal to buy back up to 12.3 million of the company s own shares. No shares had been purchased under this decision by 30 July In June, the Board of Directors decided to offer share options to key personnel, in accordance with the authorization given by the Annual General Meeting. A total of 3,580, D options, each of which can be used to subscribe one share, was allocated to some 400 persons. The remaining 2002D options (219,100) and all 2002E options (3.8 million) were transferred to the wholly-owned subsidiary Unicarta Oy to be distributed later. The subscription price for shares using 2002D options is the trade volume weighted average price for UPM-Kymmene shares on the Helsinki Exchanges between 15 April and 15 May 2002 plus 10%, i.e Subscription prices for shares subscribed will be reduced, on the respective record dates for dividend payment, by the amount of dividend declared after the period for determining the subscription price has expired and before the shares are subscribed. The subscription period is 1 April April Apart from the above, the Board of Directors has no current authorization to issue shares, convertible bonds or share options. Share subscriptions under convertible bonds and share options offered to management could raise the number of shares to a maximum of 273,557,711. Dividend The dividend of 1.50 per share decided on by the Annual General Meeting, a total of 388 million, was paid on 3 April Litigation In March 1999, the European Commission presented UPM-Kymmene with a Statement of Objection alleging participation by the company s predecessors in a price cartel concerning newsprint during the period The company s response to the allegation is being considered by the Commission. No provision has been made in this respect. The company has no other significant matters of litigation. Market outlook In the Group s main markets, economic recovery is forecast to remain modest. Demand for printing papers is not expected to change significantly in the near future. However, the demand is typically stronger during the second half than the first half of the year. Prices for the Group s products are expected to remain largely at present levels. UPM-Kymmene Interim Review 1 6/2002 3

4 Divisional reviews Magazine Papers 4 6/ / / / / / / /2001 Turnover, million ,742 1,753 Operating profit, million % of turnover Operating profit excl. amortization of goodwill, million % of turnover Deliveries, 1000 t 1,153 1,021 1, ,174 1,902 Capacity utilization rate, % Final quarter of 2001 includes non-recurring charges of 20 million. Turnover for the first half of the year was about the same as for this period last year. Deliveries were up by 14% due to the acquisition of Haindl. Weak demand kept capacity utilization down to 82%. Profitability was clearly weaker than for the first six months last year. Operating profit declined by 46% due to lower capacity utilization rates and prices. Demand for coated magazine paper in Western Europe was 3% weaker than in this period last year and for uncoated 2% weaker. In the United States, demand for coated magazine paper fell by 3% but that for uncoated rose by 7%. Market prices for magazine papers were lower than during the first half of last year. In Western Europe prices averaged 4 9% lower and in the United States 13 18% lower. Profitability was weaker in the second quarter than in the first. Operating profit was reduced by lower sales prices and higher raw material costs. Capacity utilization rates improved in the United States but remained low in Europe. Coated magazine paper prices were under some pressure again during the second quarter. Newsprint 4 6/ / / / / / / /2001 Turnover, million Operating profit, million % of turnover Operating profit excl. amortization of goodwill, million % of turnover Deliveries, 1000 t , Capacity utilization rate, % First quarter of 2002 includes non-recurring charges of 8 million. Turnover for the six months to June was 28% up on the same period last year. The growth was due to the increase in newsprint manufacturing capacity resulting from the Haindl acquisition. Deliveries were up by 43%. The capacity utilization rate was 87%, compared with 98% for the first half of last year. Profitability was poorer, mainly due to lower sales prices and capacity utilization rates. Compared with the first half of last year, demand for newsprint was 8% weaker in Western Europe and 7% weaker in the United States. Market prices for newsprint in Western Europe were 9 12% lower than during this period last year. Excluding non-recurring charges, operating profit was about the same for the second quarter as for the first. Delivery volumes were up and, on average, market prices remained rather stable. The rapid increase in recycled fibre prices in the second quarter has so far had only a marginal impact on the results. 4 UPM-Kymmene Interim Review 1 6/2002

5 Fine and Speciality Papers 4 6/ / / / / / / /2001 Turnover, million ,227 1,222 Operating profit, million % of turnover Operating profit excl. amortization of goodwill, million % of turnover Deliveries, 1000 t ,370 1,294 Capacity utilization rate, % Including internal deliveries. Turnover for the first six months was about the same as for this period last year. Deliveries were up by 6% and the capacity utilization rate was 93%, compared with 89% for the first half of last year. The coating capacity utilization rate was well below that of the paper machines. Operating profit was 8% higher than for the same period last year. Demand for coated and uncoated fine paper in Western Europe showed growth of 1% on this period last year. Market prices for fine papers in Western Europe were 5 7% lower than for the first half of last year. Profitability for the second quarter was marginally weaker than for the first. Uncoated fine paper prices rose slightly during the second quarter in Western Europe. In China, market conditions remained favourable. In the case of coated fine paper the market remained weak during the second quarter. For speciality papers, both demand and deliveries were good. Prices for certain packaging and label papers rose towards the end of the review period. The market for envelope papers remained stable. UPM-Kymmene Interim Review 1 6/2002 5

6 Converting Industry 4 6/ / / / / / / /2001 Turnover, million Operating profit, million % of turnover Operating profit excl. amortization of goodwill, million % of turnover Final quarter of 2001 includes non-recurring charges of 11 million. Turnover for the period January June was up by 7% as a result of company acquisitions and investments. Operating profit improved, and relative profitability was also better thanks to greater efficiency. Siliconized papers, in particular, were more profitable. Operating profit for the second quarter was down on that for the first, mainly due to the higher cost of raw materials and exchange rate differences. Wood Products Industry 4 6/ / / / / / / /2001 Turnover, million Operating profit, million % of turnover Production, sawn timber, 1000 m ,025 1,075 Production, plywood, 1000 m Turnover for the first half of 2002 was 3% down on last year s corresponding figure. Profitability was also down due to lower sales prices for sawn timber and to higher prices for logs. Profitability was better during the second quarter than the first, partly for seasonal reasons. There was a slight recovery in demand for sawn timber. Plywood markets have remained stable. Business in building supplies continued to be good. 6 UPM-Kymmene Interim Review 1 6/2002

7 Other operations million 4 6/ / / / / / / /2001 Turnover Operating profit, total of which Forestry department, Finland Energy department, Finland Share of results of associated companies Other Operating profit for the six months to June was smaller than for the same period last year. The forestry department s operating profit was about the same, but both the energy department and associated companies reported weaker profitability. In Finland, trading in wood raw material remained slow and timber was in limited supply. Wood prices at the mill gate were marginally lower than during the first half of last year. Wood purchases from private forests were 9% down on the first six months of last year. Electricity consumption by the Group s operations in Finland was down 6% due to lower capacity utilization rates at the mills. The market price of electricity remained low during the period. The associated company Metsä-Botnia reported a weaker financial result due to production stoppages and lower sales prices for its chemical pulp. The average market price of long-fibre chemical pulp fell to USD 455/tonne, having been USD 605 in the first six months of last year. The average price rose to USD 460 during the second quarter from USD 450 in the first quarter. Helsinki, 30 July 2002 Board of Directors UPM-Kymmene Interim Review 1 6/2002 7

8 This Interim Review is unaudited Earnings million 1 6/ /2001 Change Change % 1 12/2001 Turnover 5,245 5, % 9,918 Other operating income Costs and expenses 4,281 3, ,958 Share of results of associated companies Depreciation and value adjustments Operating profit % 1,614 % of turnover % of turnover, excluding capital gains/losses Financial income and expenses Profit before extraordinary items % 1,333 % of turnover Extraordinary items Profit after extraordinary items % 1,333 Income taxes Minority interest 1 1 Profit for the period % 955 Earnings per share, % 3.85 Earnings per share, excluding capital gains/losses, % 3.22 Balance sheet million Change Change % Intangible assets Goodwill on consolidation 2, ,452 2,086 Tangible assets 8,600 7, ,934 Investments held as non-current assets 1,511 1, ,477 Own shares Non-current assets, total 12,488 10,308 2,180 21% 12,874 Stocks 1,348 1, ,289 Receivables 1,650 1, ,845 Cash in hand and at bank Total assets 15,680 13,342 2,338 18% 16,431 Shareholders equity 6,648 5, ,810 Minority interest Provisions Deferred tax liability Non-current liabilities 4,974 4, ,913 Current liabilities 2,952 2, ,601 Total equity and liabilities 15,680 13,342 2,338 18% 16,431 8 UPM-Kymmene Interim Review 1 6/2002

9 This Interim Review is unaudited Cash flow million 1 6/ /2001 Change 1 12/2001 Operating profit ,614 Depreciation and other adjustments Change in working capital Financial income and expenses and income taxes paid Cash from operating activities ,645 Acquisitions and share purchases ,367 Other investments and purchases of tangible and intangible assets Asset sales and decrease in non-current receivables Cash provided by (used in) investing activities ,854 Cash flow before financing activities ,209 Dividends paid Share issue 419 Purchases of own shares Change in loans and other financial items ,503 Cash provided by (used in) financing activities ,399 Change in cash and cash equivalents Key figures 1 6/ /2001 Change 1 12/2001 Earnings per share, Diluted earnings per share, Return on equity, % Return on capital employed, % Cash flow from operations per share, Equity to assets ratio at end of period, % Gearing ratio at end of period, % Equity per share at end of period, Net interest-bearing liabilities, million 5,972 4,806 1,166 6,041 Gross capital expenditure, incl. acquisitions, million ,850 % of turnover Gross capital expenditure, excl. acquisitions, million % of turnover Personnel at end of period 39,167 36,563 2,604 36,298 No. of shares, average (1000) 258, ,306 11, ,892 No. of shares at end of period (1000) 259, ,314 13, ,718 For purposes of calculating key figures, own shares have been eliminated from shareholders equity and the numbers of shares. UPM-Kymmene Interim Review 1 6/2002 9

10 This Interim Review is unaudited Contingent liabilities million Change On own behalf On behalf of associated companies On behalf of others Pension liabilities Leasing commitments Includes securities for Miramichi s bond loans Values of derivative agreements Market value Market value Market value Nominal value Nominal value Nominal value million Currency derivatives Forward contracts ,657 2,461 2,296 Options, bought 25 Options, written 63 Swaps Interest rate derivatives Forward contracts ,779 5,737 8,715 Options, bought Options, written Swaps ,019 2,319 2,430 Other derivatives Forward contracts UPM-Kymmene Interim Review 1 6/2002

11 This Interim Review is unaudited Quarterly figures million 4 6/ / / / / / / / /2001 Turnover Paper Industry Magazine Papers ,742 1,753 3,548 Newsprint ,058 Fine and Speciality Papers ,227 1,222 2,362 Converting Industry ,480 Wood Products Industry ,463 Other operations Internal sales Turnover, total 2,679 2,566 2,558 2,336 2,536 2,488 5,245 5,024 9,918 Operating profit Paper Industry Magazine Papers Newsprint Fine and Speciality Papers Converting Industry Wood Products Industry Other operations 2) Total, excluding capital gains/losses ,394 % of turnover Capital gains/losses Operating profit, total ,614 % of turnover Dividend income Exchange differences Other financial income and expenses Profit before extraordinary items ,333 Extraordinary items Profit after extraordinary items ,333 Income taxes Minority interest 1 1 Profit for the period Earnings per share, Earnings per share excluding capital gains/losses, Average no. of shares (1000) 259, , , , , , , , ,892 Return on equity excluding capital gains/losses, % Return on capital employed excluding capital gains/losses, % Operating cash flow per share, First quarter of 2002 includes non-recurring charges of 8 million for Newsprint, and fourth quarter of million for Magazine Papers and 11 million for Converting Industry. 2) Includes the Group s share of the results of associated companies UPM-Kymmene Interim Review 1 6/

12 This Interim Review is unaudited Deliveries and production 4 6/ / / / / / / / /2001 Deliveries Magazine papers (1000 t) 1,153 1,021 1, ,174 1,902 3,964 Newsprint (1000 t) , ,667 Fine and Speciality papers (1000 t) ,370 1,294 2,546 Converting Industry papers (1000 t) Including internal deliveries. Production Paper (1000 t) 2,479 2,406 2,085 2,047 1,990 2,176 4,885 4,166 8,298 Capacity utilization, paper production (%) Sawn timber (1000 m 3 ) ,103 1,149 2,035 Plywood (1000 m 3 ) Chemical pulp (1000 t) ,035 1,045 2,038 Key exchange rates for the euro at end of period USD CAD JPY GBP SEK It should be noted that certain statements herein which are not historical facts, including, without limitation those regarding expectations for market growth and developments; expectations for growth and profitability; and statements preceded by believes, expects, anticipates, foresees, or similar expressions, are forward-looking statements. Since these statements are based on current plans, estimates and projections, they involve risks and uncertainties which may cause actual results to materially differ from those expressed in such forward-looking statements. Such factors include, but are not limited to: ( operating factors such as continued success of manufacturing activities and the achievement of efficiencies therein, continued success of product development, acceptance of new products or services by the Group s targeted customers, success of the existing and future collaboration arrangements, changes in business strategy or development plans or targets, changes in the degree of protection created by the Group s patents and other intellectual property rights, the availability of capital on acceptable terms; (2) industry conditions, such as strength of product demand, intensity of competition, prevailing and future global market prices for the Group s products and the pricing pressures thereto, financial condition of the customers and the competitors of the Group, the potential introduction of competing products and technologies by competitors; and (3) general economic conditions, such as rates of economic growth in the Group s principal geographic markets or fluctuations in exchange and interest rates. UPM-Kymmene Corporation, P.O. Box 380, Helsinki, Finland. Tel , fax , , 12 UPM-Kymmene Interim Review 1 6/2002